Ferrellgas Partners Receives a Sell from UBS

UBS analyst Shneur Gershuni reiterated a Sell rating on Ferrellgas Partners (NYSE: FGP) yesterday and set a price target of $6.50. The company’s shares closed yesterday at $7.54, close to its 52-week low of $7.15.

Gershuni commented:

“With its FY4Q earnings, FGP noted that due to increased leverage and higher debt levels, from increased debt from the Bridger acquisition, the Jamex settlement and the effect of warmer weather on propane earnings that its board is contemplating a reduction of its distribution to $1.00/unit from $2.05/unit on an annualized basis. This decision is not final, but is an option to reduce its leverage and remain in compliance with its covenants. However, with September and October weather warmer than normal and running a distribution cut to $1.00/unit through our model, without accounting for a much colder than normal winter, we estimate that FGP would not remain in compliance with is covenants.”

According to TipRanks.com, Gershuni is a 4-star analyst with an average return of 4.0% and a 59.2% success rate. Gershuni covers the Basic Materials sector, focusing on stocks such as American Midstreampartners Lp, Holly Energy Partners L.P., and Dcp Midstream Partners Lp.

Ferrellgas Partners has an analyst consensus of Moderate Sell, with a price target consensus of $11.88.

Based on Ferrellgas Partners’ latest earnings report for the quarter ending July 31, the company posted quarterly revenue of $410 million and GAAP net loss of $655 million. In comparison, last year the company earned revenue of $471 million and had a GAAP net loss of $79 million.

Based on the recent corporate insider activity of 7 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of FGP in relation to earlier this year.

Ferrellgas Partners, L.P. distributes and supplies propane and related equipment primarily in the U.S. The company operates through two segments include: Propane and Related Equipment Sales and Midstream Operations. The Propane and Related Equipment Sales segment distributes propane and related equipment and supplies to customers in the U.S. The Midstream Operations segment generates revenues from treatment and disposal of salt water generated from crude oil production operations at salt water disposal wells and from the sale of recovered crude oil from skimming oil process. The propane distribution market is seasonal because propane is used primarily for heating in residential and commercial buildings. It serves residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in the District of Columbia and Puerto Rico. The company was founded in 1994 and is headquartered in Overland Park, KS.